Shadow dancing with debt: The credit ratings agencies must be reformed.

15 November 2014.

South African economic prospects have recently been downgraded, yet again, by major credit ratings agencies (CRA’s). The nation’s sovereign rating now stands just above junk bond status. Major parastatals like Eskom and Sanral have also been knocked by ratings declines because of poor planning and investment decisions. Similarly, South Africa’s highly regarded and robust banking system has been marked down by the CRA’s, precipitated by the recent blowback of African Bank’s questionable lending practices.

The fact is that these agencies have major impacts on investment decisions across the economic landscape. Consequently the inherent lack in transparency and accountability of the big three CRA’s – Standard and Poor, Fitch and Moody’s – is unacceptable.

While there are few arguments that South Africa’s economy is improving, the larger question about the massive influence of the rating agencies on international markets remains. Their welfare is inescapably linked to private capital while their decisions have massive economic and political repercussions.

Many institutions have reviewed the role of CRA’s over the years. Various UN bodies have examined them, both before the 2009 financial sector meltdown – which the ratings agencies not only failed to predict but which they arguably contributed to by failing to read obvious signs of speculation and market manipulation – to more recent interrogation which highlighted concerns around their lack of transparency and objectivity.

There remains profound ambivalence about their lack of independence. There is pressure to reform the malign influence of these undemocratic, unelected entities on international capital markets and especially to correct the inherent bias against the global south and toward first world financial institutions.

Turkey has a long record of objecting to the influence of the vagaries of these institutions. Premier Tayyip Erdogan suggested that a ratings downgrade by Fitch was politically rather than economically inspired and informed.

More sinister is the ability of the agencies to exploit inherent vulnerabilities in the economic system through their close alliances in the occult world of the casino economy. They are capable of essentially gaming the global financial system as inside traders. And just how have they failed to predict every single major financial crisis for the past two decades?

There was a degree of schadenfreude when various EU institutions howled about the downgrading of Greece, Ireland and Portugal to junk status by the big three after the 2009 financial meltdown, while equally speculative calls by the agencies on developing nations like Argentina, Ukraine and now South Africa are ignored. After all, the erosion of southern institutions stands to benefit first world capital markets by reducing the value of essential commodities like land, metals, energy and labour.

These inconsistencies highlight what essentially amounts to institutionalised manipulation of the market system by the dominant economic players. Already vulnerable nations and institutions are further marginalised and undermined. The agencies are ideally situated to readily initiate runs against currencies, undermine shareholder value and play the longs and shorts of arbitrage.

The Agencies themselves suggest that they, like the alternatives to democracy, are the least bad option. However this perspective is not only self-serving but unconvincing. The present reality is that the dominance of three massive financial institutions, joined at the hip to the dominant capitalist system, is incapable of independent reflection and assessment.

Several alternatives have been raised. Those closest to the system suggest that multilateral agencies such as the World Bank or the OECD act as independent arbitrators. However, such an approach is simply replacing one flawed system with another.

Another possibly more realistic option, called the Universal Rating Group, has already been put into play by a curious alliance of joint Chinese, Russian and US interests. This sort of option could be extended to a BRICS-aligned agency, which could be a more independent and attractive option.

Whatever the case, the existing CRA’s clearly fail to meet the requirements of a rapidly changing world, one which needs to evolve in order to shift to a more adaptable and equitable global economic model. The impetus toward economic and social transition is impeded by the power and vested interests of these agencies, combined with their failure to either provide reliable prediction or suitable adaptive strategies.


Originally published by SACSIS, the South African Civil Society Information Service in November 2014.


Propaganda dressed as news

How Corporate PR industry misinforms and lies to public in a post truth world.

The fossil fuel industry’s determination to manufacture doubt about global warming illustrates the desperation of the oil, gas and coal producers as the realities of climate change strike home. They have created a network of front organisations which actively engage in lies and misinformation about the realities of climate change. While the campaign is largely driven from within the developed world the global South has also been pulled into this high stakes dirty tricks campaign.Keith Bryer has been a regular columnist for South Africa’s largest newspaper group, Independent Media, for several years. He is published in the group’s Business Report, a daily business supplement distributed inside each of the group’s regional titles, reaching hundreds of thousands of readers. Strangely, neither Bryer, nor Business Report, are willing to disclose whether he is a paid columnist or just a source of free copy.

Bryer spent decades at the centre of the public relations department for British Petroleum (BP) South Africa. Now retired, he is listed as an associate partner of the major London based international PR company, Etoile Partners, a “geopolitical consultancy” ( whose clients include the oil industry and whose remit includes “reputation management”.

Recent revelations by whistleblowers have shown that decades ago the fossil fuel industry already knew more than anybody else about the impact of their products on climate change. (See nose198, The nuclear lie of the land.)

As a result, there is a real risk that companies like ExxonMobil can be held liable not just for covering up the known consequences of greenhouse gas emissions, but for lying about these and then embarking on a cynical long-term campaign to undermine any action to reduce fossil fuel use. The industry faces an unprecedented class action, dwarfing the extent of the punishment meted out to the tobacco industry, which already runs into hundreds of billions of dollars.

Exxon has known of these specific risks since the 1970s – from its own research. Yet despite having developed a scientifically sound model, Exxon not only failed to take action but instead rather chose to spend untold millions of dollars both covering up the facts and actively spreading doubt among the public, politicians and legislators.

Dozens of front organisations were created to push this agenda. Groups like the Competitive Enterprise Institute, The Heartland Institute and the Cato Institute continue to do so, effectively undermining and stalling meaningful action to address climate change.

The documents released in late 2015 by Inside Climate News and The New Yorker have prompted various US state attorneys, including those of New York, California, Massachusetts and the US Virgin Islands, to start investigations to uncover the fraud and malfeasance. The potential damages pose a threat to the very existence of the industry. The stakes could not be higher.

In order to spread this corporate counter-narrative as widely as possible the fossil fuel industry has exploited the increasingly tightly controlled corporate media conglomerates and the trend toward outsourced news gathering. Most people are unaware that a significant proportion of current news is sourced directly from public relations organisations contracted to multinational corporate interests, while mainstream media outlets simultaneously shrink newsrooms and staff to maximise profitability.

As journalists have declined, the ratio of PR news agency employees to journalists has risen. This media infiltration by vested interests has inevitably skewed the bias, as the flow of public relations masquerading as news swells to a flood. As liberal media baron Randolph Hearst put it, “News is what someone does not want you to print – the rest is advertising.”

This is where PR specialists such as South Africa’s Bryer enter the picture, having spent years fronting up for the fossil fuel industry. Not only does he snidely dismiss and denigrate the very notion of climate change, terming it “so-called,” and an unproven theory caused by the sun; he insists that those calling for action on emissions are “communists and socialists of every stripe” and “latter-day puritans”. These are well-documented tactics, widely employed by the Merchants of Doubt.

Reading Bryer’s articles is like juggling a series of contradictions. In one, he claims coal companies are being wrongly held liable for climate change, in another it’s Exxon that’s liable. He cites pundits like the utterly discredited ex-Greenpeace founder Patrick Moore as a reliable source. He claims dealing with climate change will be prohibitively expensive, yet fails to mention the staggering costs and risks of delayed action to manage the emerging impacts of global warming. Bryer unreservedly supports the oil and nuclear industries, excuses Volkswagen’s emissions fraud, undermines solar and wind-generated alternative energy. Naturally he disagrees vehemently with international agreements to deal with climate change. And as a seasoned PR hack, he spins a convincing story to a largely sympathetic audience.

The extent to which Bryer’s discourse closely parallels the identical narratives emerging elsewhere is telling. A recent example neatly demonstrated his role in this corporate echo chamber. In July 2016 he wrote of how ExxonMobil was forced to defend the liberties of free speech as it sought to counter legal investigations into its lies and cover-ups, as discussed.

Exxon has fought back on several fronts. First, it called in its PR media outlets; second, it engaged in the legal battle; and third, it harnessed tame legislators it has a record of funding. The underlying message was the absurd claim that Exxon’s right to free speech was being undermined and that it was the target of a latter-day witch-hunt by nefarious green groups.

Bryer’s narrative was essentially a cut-and-paste emanating from Exxon’s PR pundits in the USA. As far as I can ascertain Bryer has never indicated in any article he has written his link to Etoile, as an associate partner. Remember, their self-proclaimed job is “reputation management” for the oil and gas industry, among others.

I raised these failures of disclosure with the Press Council of South Africa. Despite pointing out the links between Bryer and the fossil fuel industry the Council insisted Bryer was free to express his opinion and that opinion cannot constitutionally be limited, as it is protected under the rights to free speech. Further appeals that provided detailed material links between Bryer and Etoile were likewise  dismissed, again citing the protected right to free speech.

This is a remarkable ruling on two accounts. First, the Press Code requires balance and the disclosure of vested interests. It stipulates that no intentional distortion or misrepresentation can be made, nor shall commercial interests be allowed to influence or slant reporting.  It also clearly states that conflicts of interest should not undermine the trust of the public in the media.

The fact that a business newspaper failed to disclose these links appears to be a significant moral and ethical lapse of disclosure, notwithstanding the Press Code.

Surely if Bryer’s writings were above-board and simply a reflection of his own opinions – not those he was paid to write for his entire professional life – he would disclose his links to Etoile? And surely Business Report would also feel morally obliged to share this information? Neither did so.

Surely neither he nor his publishers ought to be able to naively claim that he is simply a “retired communications consultant” providing his “opinion” – rather than an active player in the field?

On a more sinister note, Bryer’s role appears entirely consistent with that of the Merchants of Doubt, constantly seeking to cast aspersions, sew discord and undermine opposition to its interests. The first rule of propaganda is to repeat a lie, often; by doing so people start to believe it.

Glenn Ashton

Copyright © 2016

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First printed in Noseweek Issue 205, November 2016. Please contact Noseweek for reprint permission via
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Authorities finally move against Australian mining company – Tormin accused of breaching environmental licence.

Photo of collapsed cliff
This cliff partially collapsed apparently as a consequence of activity at the Tormin mine on the West Coast.
20 October 2016

The controversial Australian mining company Mineral Resources Commodities (MRC) has launched a court case against the national Department of Environmental Affairs (DEA) arising from the department’s raid on the company’s Tormin Mine, situated 350 kilometers north of Cape Town.

A spokesperson for the company Anne Dunn, confirmed that MRC was taking legal action.

The raid in late September had been expected after numerous complaints to mining and environmental authorities about alleged illegal actions by the mine in the coastal zone. These include the construction of structures on the beach zone, mining in prohibited zones and questions about a massive collapse of the sea cliffs below the mine processing plant.

These actions fall under the the National Environmental Management Act and specifically the Integrated Coastal Management Act (ICMA). They also appear to be in conflict with Tormin’s mine licence conditions managed under the Mineral Petroleum Resources Development Act.

This was the second recent blow for MRC. The company announced its withdrawal from the rich Xolobeni mineral sands project on the Wild Coast in July this year after divisions in the community peaked with the murder of anti-mining leader Sikhosiphi “Bazooka” Rhadebe in March.

Tormin’s mining practice has been in the spotlight since the mine began operations in March 2014. The following month the Department of Mineral Resources issued the mine with instructions to rectify several changes it had made to its mining practices which deviated significantly from the original environmental authorisation provisions of the mining licence.

These beaches are famous for their pink sands, tinted by high proportions of garnet, a super-hard and therefore commercially useful mineral. Other minerals – zircon, ilmenite, rutile and leucoxene – were further treasures hidden within the pink sands. These minerals collectively make up almost half of the beach by volume, a veritable bonanza. Tormin declared a profit of $12.9 million on a turnover of $48 million in 2015, its first full year of operation.

From the outset Tormin only had environmental clearance to extract around 5% of the minerals, specifically the zircon and rutile. This would have had only limited environmental impact. However the mine unilaterally began to extract the full range of minerals from the sand, a move that placed the environment of the mine at serious risk through extraction of half of the beach sand by volume.

These beaches are backed by steep, unstable sea cliffs. Consequently all mining – and any other activity at all – was forbidden in a buffer zone that extended 10 metres from the foot of the cliffs seaward. However this has apparently been ignored from the outset, with details of mining recorded in aerial photographs and Google Earth images.

Google Earth image from 2013 of the cliff prior to its collapse.
This was taken as the cliff started collapsing. Seepage from the mine site/groundwater table is evident. (Feb 2015) Photo supplied
Google earth view of the collapse (February 2016)
Another view of the partial collapse. Two notable things are visible here. A slurry on the left side of the collapse indicates high water levels. On the right hand side mine overburden pipelines are visible. These are illegally situated. The mining licence stipulates that they must be laid along roadways and buried. (May 2015)
This shows the “repairs” to the cliff by Tormin, which were presumably not permitted by the Department of Environmental Affairs as this would have required a NEMA section 24 notice and permission in respect to ICMA. Also it is evident from this picture that the mine has used its overburden to repair the cliff and also presumably material from its “dam” to the south of the mine processing site. (June 2016)

Because the entire mine is directly on the beach, it falls within what is defined by ICMA as the coastal protection zone. This includes an area up to a kilometre from the shoreline. ICMA provides substantial statutory protection to this important ecological zone, hence the exclusion zone. ICMA is administered by the DEA.

It is also important to note that when Tormin gained permission to mine the beach, mining was jointly governed by both DEA and DMR. DEA dealt with environmental governance and DMR with mining. However in December 2014 this changed into what is known as the “one environmental system” where DMR assumed all responsibilities for mine management, including the environment. This is central to the legal challenge Tormin has launched against DEA’s raid on the mine.

DMR appears to have insufficient capacity, knowledge, or will to enforce good environmental governance. This has been evident at Tormin. In March 2015 DMR questionably granted Tormin permission to expand the processing area, which also falls in the coastal zone. The department also permitted a radical change in mining methodology that involved trucking all the beach sand to the processing zone on the cliffs above the beach. This was originally to have been pumped in a concentrated slurry from the beach.

Worse yet, in April 2015 the Western Cape director of DMR granted permission for further plant expansion and for the illegal groyne – a structure running from the beach out to sea – that Tormin had built on the beach, from within the exclusion zone well into the surf zone. This kind of activity is prohibited under ICMA and requires extensive environmental research. The provincial DEA informed DMR that its permission was irregular and could not be countenanced. DMR failed to take further action.

Various independent parties repeatedly informed both DMR and DEA of their concerns about these contraventions, to no avail. In November 2015, the Centre for Environmental Rights wrote a letter to the Western Cape office of DEA, setting out that department’s obligations in terms of ICMA and its statutory obligation to take action against the alleged transgressions by Tormin. In May 2016 DEA responded that it took the matter seriously and was investigating,  in consultation with DMR.

Action was finally taken in the raid this month, almost a year after the letter to DEA. The raid involved  representatives from national and provincial DEA, The South African Police Services, The Department of Rural Development and Land Reform and the local Matzikama Municipality. DEA spokesperson Albi Modise told GroundUp that the raid formed part of a criminal investigation process.

The legality of the raid has subsequently been challenged by Tormin via its holding company Mineral Sands Resources. However the DEA was, at the time of writing, not aware of any legal challenge to the raid.

Several questions arise. First, if everything was above-board at Tormin why would the company be reluctant to allow inspection of its operations? Tormin has established a record of discouraging and preventing inspections by various parties, including DEA and the municipality. The latter’s officials have been forbidden by elected councillors to inspect the mine, an illegal action under the Municipal Systems Act. Tormin has claimed that inspections disrupt operations, a hollow excuse.

Secondly, if there were no problems, why is Tormin challenging the legality of the raid in what appears to be a direct attempt to stonewall the investigation?

Contacted by GroundUp, Tormin and its director, Mark Caruso, declined to comment further on the matter. A report in News24 by Matthew le Cordeur quoted Caruso as saying he felt the warrant was illegal as the mine was regulated by DMR not DEA. He went on to claim that Tormin was legally compliant with mining and environmental legislation.

These claims appear trite. If everything was above-board, Caruso should have no concerns. It is telling that he apparently wishes to retreat to the protection of DMR, given that department’s apparently limited grasp of its environmental responsibilities and its bizarre prior rulings.

What consequences may Tormin face? Firstly, it could be in breach of its mining licence by mining in the exclusion zone. It could be forced, under section 24 of the National Environmental Management Act,  to rectify this and to address the construction of the rock groyne. It could be ordered to properly repair the collapsed cliff. It could  be instructed to address the changes to mining methodology and put proper measures in place to prevent further erosion of the beach and cliffs. Work at the mine could be halted until this is done.

If the DEA raid found sufficient evidence – apparently computers and documents were removed from the mine – that these actions were knowingly undertaken, management could be held liable and criminal action could be instituted. Ignorance of the law is no excuse; it is the duty of the mine owners to be fully informed and adhere to all relevant legislation.

The result could involve substantial damages, a revision of the operating licence of the mine, withdrawal of the licence entirely or even the expulsion of the company from the country.

After years of civil society oversight,  the authorities have finally taken action and are investigating some serious concerns with Tormin’s management practices.

Australian mining companies have evoked mixed response in Africa. Some are exemplary, participatory and transparent. Others feel they can do as they wish without consequence. Judgement remains open in Tormin’s case.

Ashton is a journalist, author, researcher and columnist. He was commissioned by GroundUp to do this analysis.


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Are We Attracting the Wrong Kind of Mining Entrepreneurs to South Africa? The Case of MRC, Xolobeni and Tormin

I wrote this last year – it was my last article for SACSIS before that useful and highly influential news service was forced to close due to funding cuts.

Since this was published matters have deteriorated at Xolobeni and Tormin, culminating last week with the murder of Sikhosiphi ‘Bazooka’ Rhadebe‚ the head of the Amadiba Crisis Committee, a social network opposing the mining of the community’s traditional land in the Xolobeni area.

It is notable that the CEO of MRC Mark Caruso has denied any connection with this murder. However this disclaimer cannot be taken in isolation, especially given his bizarre response to critics recently; “And I will strike down upon thee with great vengeance and furious anger, those who attempt to poison and destroy my brothers. And you will know my name is the Lord when I lay my vengeance upon thee,” which is supposedly from the Bible (Ezekiel 25:17) but is also quoted by Jules in the ultra-violent (does he make any other sort?) Quentin Tarantino film Pulp Fiction.

Such utterances cannot be excluded from the greater dialogue around the unfolding violence at Xolobeni which has been on the rise for more than a year prior to this murder, the second associated with this mining project.

Originally published 17 Jun 2015

South African wealth is founded on our extraordinary mineral bounty, conservatively valued at over $3 trillion (R36 trillion). Our future is dependent on how we manage this geological legacy. We can either harness the full spectrum of opportunities or lay ourselves open to what is known as the “resource curse” where natural resources are exploited by unscrupulous or corrupt entities, with minimal national benefit. A recent example provides some insight in how we appear to be headed down the wrong path.

Most people familiar with the mining landscape are aware of the well-publicised attempts to gain mineral rights to access the apparently lucrative wild coast heavy mineral sands, known as Xolobeni, that have repeatedly failed. Not only is this resource located amidst a rich, relatively pristine ecosystem but this is hosted within an equally rich and dynamic social fabric, protective of its cultural and natural heritage.

The erstwhile developer of this resource is a relatively unknown minor listed Australian mining company, Mineral Commodities Limited, known as MRC, headed by one Mark Caruso. Caruso creates the impression of the archetypal “ocker,” a rough and ready Australian bloke, prepared to get things done come what may.

Over the past 18 months Caruso has commissioned a new mineral sands mine called Tormin, some 350 kilometers north of Cape Town. Permission and rights to operate Tormin were gained by the former MD, South African Andrew Lashbrooke. These two have subsequently fallen out and have become embroiled in legal action in Cape High Court, where Lashbrooke seeks substantial financial redress and damages.

Tormin has also been at the centre of serious allegations that its methods of operation are illegal and irregular. It has removed tens of thousands of tonnes of garnet and ilmenite that it has not received the requisite permissions to extract. These materials have illegally been stored in informal stockpiles on agricultural land.

From an environmental perspective, a lack of suitably careful mine management has seen cliffs adjacent to the treatment plant collapse onto the beach. The company has changed its mining methods without due permission or consultation and also built illegal hard breakwaters and jetties on the beach.

On top of this, the trucks delivering materials from the mine have seriously damaged hundreds of kilometres of road by transporting materials down minor backroads instead of using the approved route. Some of the materials are radioactive and require prominent identification but vehicles are allegedly improperly identified, monitored or managed.

Local communities in Lutzville and Koekenaap are up in arms because promised benefits from the mine have failed to materialise. Instead of local job creation, workers have been brought in from Xolobeni in order to curry favour from that community.

These community tensions have resulted in allegedly illegal protests. In November the police arrested 28 community members who await finalisation of the case, with the next hearing due in July. Community leaders accuse mine management of arrogance and of only dealing with selected ward councillors who are compromised through “benefits” provided by the mine. The community feels let down by the justice system and elected leaders.

MRC has pursued a similar modus operandi in Xolobeni, where for years it has pitted members of the community against each other in order to gain permission to access the resource. False petitions have been compiled, and violence and intimidation has recently resulted in a restraining order being issued against “leaders” associated with MRC. These conflicts have been widely covered in the media and have even become the subject of an award winning film, “The Shore Break.”

However MRC, and Caruso in particular, came to South Africa having apparently learned some useful tricks in ingratiating local officials and appointees during previous mining ventures with his UK listed company, Allied Gold, in the Solomon Islands in the South Pacific. Caruso gained the rights to the largest known gold resource in the Solomons, Gold Ridge, where the land rights had controversially been signed away by the resident community in a deal which created longstanding and significant social rifts. After Allied sold Gold Ridge the mine was subsequently shut down because infrastructure was insufficiently robust to deal with local flooding. Similarly poor community relations have dogged MRC’s other investments in gold mines in Papua New Guinea and Sierra Leone.

It is notable how these patterns echo the experiences of those involved in both the Tormin and the Xolobeni mineral sands resource projects. Not only has MRC been instrumental in setting community and even family members against each other at Xolobeni, through sly selection and appointment of various community proxies who have been given vehicles and benefits such as executive positions in subsidiary companies Blue Bantry and Xolco, but it has spread its influence far wider.

For instance well-supported allegations exist that MRC’s attempts to exploit the Xolobeni resource is intimately linked both to the highly contentious wild coast N2 toll road debacle, as well as to a bizarre political decision by the President to illegally interfere in regional traditional leadership matters by removing rightful amaPondo chiefs in the area. This matter was eventually decided by the Constitutional Court, which reinstated the very leaders who happened to question both the controversial N2 toll road and the Xolobeni mineral sands mine.

The link between the mine and the toll road relates to the necessity for a suitable route to transport nearly half a million 40 tonne truck loads of resource to the Durban port. It also aligns with government’s insistence that mega-projects will deliver improved living standards, despite numerous studies showing otherwise. The fact that MRC has established intimate relationships with various key political and traditional leadership stakeholders is not co-incidental.

South Africa needs to manage investment and exploitation of our mineral resources in environmentally and socially responsible and sustainable ways. We need to maximise the benefits and beneficiation of our resources. Good behaviour must be encouraged, bad practice curbed.

It appears we have failed to follow these fundamental precepts in the case of MRC. The company has created zero local beneficiation, in fact the MRC/ Lashbrooke court case centres on export of the garnet resources that were to be locally beneficiated. Now MRC simply ships its ill-gotten gains offshore to China and Australia, while creating significant social and environmental externalities.

Judging from this case it appears the Department of Mineral Resources (DMR) is not a suitable agency to promote and monitor the planning and implementation of mining. Extensive interaction has proven the Department to be remarkably un-transparent and non-responsive to enquiries about MRC’s mining operations, which should be in the public domain. Since DMR assumed oversight of environmental compliance the flow of information on mining in general, and Tormin specifically, has essentially dried up.

If we are to maximise the benefit of our resources we cannot countenance the non-transparent oversight of mining and the externalisation of social and environmental impacts. Our mineral resources must benefit the nation, not just the entities exploiting them. In order to do so we need transparent due diligence processes, not a free for all where resources are exploited by unscrupulous opportunists.


This article was first published on SACSIS, the website of the South African Civil Society Information Service –

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Anglo American leaves us in its dust…

This article below was originally published 5 years ago, when Anglo American was contemplating development of the massive Pebble Mine in Alaska, a development fraught with danger, in order to point out the poor track record of what was once South Africa’s most powerful company and a keystone to apartheid.

Despite Anglo abandoning direct involvement with the Pebble mine after extensive international pressure was brought to bear, it remains in denial of its obligations to rehabilitate the consequences of its vast commodity extraction throughout South Africa.

I felt it worthwhile to edit and repost this article in light of Anglo Americans latest plan to sell off more of its local assets. As raised by the Centre for Environmental Rights, Anglo American needs to be far more transparent in how it manages its social and environmental responsibilities as regards both its historical legacy and its proposed asset sales.

Anglo American: Homegrown Exploitation Gone Global

By Glenn Ashton · 25 Jul 2011

Originally published by SACSIS – the South African Civil Society Information Service.


During the peak of the anti-apartheid disinvestment campaign the Anglo-American Corporation took full advantage of the situation and snapped up disinvesting companies. By the 1990’s Anglo American controlled 85% of the companies and over 60% of the wealth of the Johannesburg Stock Exchange, making it the biggest economic beneficiary of apartheid.

Through its diversified holdings it controlled vast sectors of the economy. Besides mining it was involved in forestry, paper, retail, car manufacture and assembly, steel, insurance, food processing, banking and property, the media and elsewhere. Today it has evolved into a prime example of a transnational neo-colonial monster with inordinate social and environmental footprints. Even its name is redolent of colonial times and perhaps more relevantly, its colonial roots.

Anglo American was founded by the Oppenheimer family amidst the Kimberley diamond rush of the early twentieth century. The Oppenheimers challenged the status of Cecil John Rhodes, that arch-colonialist and founder of diamond giant De Beers. Anglo was formally established in 1917, with assistance from, amongst others, American robber baron J.P. Morgan. The Oppenheimer’s eventually absorbed De Beers, creating a controversial diamond monopoly, which has endured for almost a century.

Anglo-American grew and diversified into gold mining, firmly establishing itself as a dominant economic force in South Africa during the heyday of apartheid. It actively participated in the racist migrant labour dispensations pervasive throughout the region. Mine workers from across the Southern African region were housed in hostels, infamous for their poor living conditions.

Even during the dark days of apartheid Anglo American was careful to portray itself as a benevolent employer. While it collaborated and benefited from its apartheid relationships, its ownership, particularly the Oppenheimer family, actively attempted to project a liberal, even progressive line.

This was managed primarily through its ownership and control of large chunks of the print media. Yet when the Anglo-American controlled Rand Daily Mail upset the ruling Nationalists through exposing the Biko murder the plug was pulled on this leading progressive newspaper. Anglo, offered boundless opportunities by a racist government, was not about to bite the hand that fed it, least neither too early nor too hard. Today Anglo American continues to apply this pragmatic self-interest and real-politik approach.

Anglo-American was never confined only to South Africa. Just as its diamond arm De Beers bore global influence, the apartheid era Anglo American cultivated front companies to project its economic power. Minorco was established as its overseas arm to avoid the South African stigma. Its external persona was handled with extreme care and sensitivity for its roots.

Like most large corporations Anglo American demonstrates psychopathic traits, neatly encapsulated in the 2004 award-winning documentary, “The Corporation.” Its true intentions are masked by apparently benign concepts like “corporate social responsibility” and “sustainable development.” Such portrayals are far removed from exploitative realities. Anglo American’s most recent feel good catchphrase, “Real Mining. Real People. Real Difference.” should perhaps have the corollary “Real bullshit.”

This careful image management belies the realities. While the company was amongst the first in South Africa to recognise unionised workers, it did not shy away from bringing down the might of the apartheid state on the unions when their demands were too costly. As labour costs rose, mechanisation was prioritised to reduce costs. Whenever there is an industry downturn, it is inevitably the labour force that is first to go. Corporate benevolence remains an oxymoron.

This scale of exploitation is justified by prioritizing the return on capital and maximising shareholder return. Despite the work of important institutions such as King 3, the corporate model is fundamentally at odds with the supposed aims of triple bottom line accounting – social, environmental and economic sustainability.

The problem is worsened when corporations say one thing while doing another. This remains the case with Anglo-American. Its questionable practices have also been exposed in a 2007 report by the international NGO, War on Want. Their report titled, Anglo American: The Alternative Report, compares and contrasts the company’s corporate social responsibility rhetoric with its actual practices uncovering damning evidence of human rights abuses in Africa, including South Africa. On the one hand Anglo American claims to be a trendsetting model of corporate responsibility, yet on the other continues to exploit workers and the environment.

This is neatly illustrated in Anglo American’s engagement with the then-banned ANC. Informed by the high road/low road model of its scenario planner Clem Sunter, Anglo recognised both the human costs of apartheid and the economic risk of operating within a failed state. While the liberal, primarily English speaking leadership of the company claimed to be opposed to grand apartheid they were never averse to profiting from its structures. This relationship was reminiscent of the white population as a whole – just as it is impossible to find anyone who voted for the apartheid regime, it is equally impossible to identify a single quisling corporation!

Shortly after the governing ANC took control of South Africa, Anglo American and other business leaders arranged a quid pro quo between the corporate world and the incoming government. On the one hand it would be business as usual with no talk of nationalisation. On the other, corporates wasted no time in bringing the ruling elite into their cushy fold, ostensibly to support the incoming government and inspire business confidence. Accordingly  the apparently socialist tendencies of the Reconstruction and Development Project (RDP) were cast aside to be replaced with the neo-liberal GEAR policies.

While Anglo was a major beneficiary of apartheid and the peaceful transition to democratic rule, its consequent behaviour was telling. Anglo was amongst the first of the large South African corporate entities – others being Old Mutual and South African Breweries – to shift their asset bases offshore, to London. It was remarkable the new government allowed this but the reality was that corporate power held the ANC leadership over a barrel. Refusal to allow this capital exodus would have shown up the new government as being closed to transparent business practice as dictated by the Washington Consensus, with negative consequences for the country. The counter was that loosening exchange controls would hopefully attract foreign capital.

Anglo’s relocation of its resource base further protected it against possible future nationalisation. The sale of diverse, non-core assets was facilitated while reserves were accrued. Anglo American PLC returned to its roots to become a global mining player, involved in gold, copper, platinum, nickel, ferrous metals, coal, industrial minerals and diamonds, the latter controlled through close realignment with its historical fellow traveller, De Beers.

Anglo-American has subsequently copped significant media flak about allegations about poor corporate behaviour in South Africa, Ghana, Peru, Columbia and Zimbabwe and elsewhere. It has tried, and often managed, to spin its way out of trouble, using skilled PR and historical lessons in image management, portraying its best corporate face to the world while hiding its warts.

However there is no more telling indication of the nature of the beast that is Anglo American than its interest and continued participation in pursuing the controversial Pebble mine in Alaska USA. While the risks of extracting oil in the otherwise unspoiled spaces of the fragile tundra and boreal areas of the Arctic fringes are known, the risks of this mine are exceptional.

Pebble Mine is located above Bristol Bay in south-western Alaska. It is potentially the worlds richest mine. It would be the biggest mine in North America, two miles across and thousands of feet deep. It would require four massive earth dams, the largest the size of the Three Gorges Dam in China, all in an extremely seismically active area. The mineral deposits are in sulphate rich rock, which would result in acidification of the water filling these dams. The consequences of failure would be catastrophic.

The mine drains into the world’s largest remaining spawning site for sockeye salmon. Even minuscule amounts of copper can disorient salmon, rendering them unable to locate spawning sites. The mine will almost certainly have massive impacts, both on the sensitive environment and the social structure of the area, dependent on fishing. The mine has already opened community rifts; some perceive it as an opportunity, others are bitterly opposed. Were it not for extensive lobbying, boosted by the endorsement of the controversial Alaskan ex-governor Sarah Palin, this mine may have already been shelved.

In reality, nowhere in the world has a mining company been able to properly manage the full external impacts of its activities. If this were possible, the mineral extraction industry would have a benign reputation. Instead it is more accurately and correctly seen as socially and environmentally exploitative, despite the vast amounts spent on PR spin and green-wash.

Anglo-American epitomises so much that is wrong with our world. It is a company deeply rooted in neo-colonialism. No matter how supposedly progressive its core values are, it has chosen to remain a major player within the most exploitative industry on earth – that of ripping apart the fabric of our ecosystem to extract what are euphemistically called resources.

The real question Anglo American – together with its fellow resource extractors – must answer is: Whose resources are these and from whose world are they torn? The only realistic response must be that both the resources and the earth are collectively owned by us all, as so neatly analogised in James Cameron’s movie Avatar. It is not their property – it is under our collective stewardship. The riches of the earth do not and cannot only belong to those who have accrued their power and wealth through nefarious and exploitative means, including being the primary beneficiary of apartheid.

It is only through its power and legal clout that Anglo American has avoided reparations for its exploitative behaviour under apartheid. Its social impacts are recognised; miners and workers have been abandoned with paltry pensions and health severances, many consigned to the slow agonising death of silicosis. It is equally culpable for the acid mine drainage problems now plaguing the Witwatersrand, together with the radioactive pollution of watercourses. The irony of extracting platinum for pollution control while releasing vast amounts of pollution to extract it apparently escapes it. Similarly the industry has side-stepped meaningful discussion of how De Beers wants to walk away from rehabilitating vast tracts of the north-west coast of South Africa from which it has wrung decades of obscene profit.

Anglo American can spin all it wants but the reality is it is our very own, homegrown neo-colonial exploiter, gone global.


Republished under a creative commons licence.

South Africa introduces a 20% sugar tax on cooldrinks / soda.

The article below, written and published in early 2014, put forth the case for a sugar tax in South Africa. The good news is that the South African Finance minister announced that a 20% tax would be implemented on cooldrinks / sodas as from April 2016, more than a year from now.

While it is partially understandable that there is a delay in implementing this tax in order to put the correct structures in place, I raise the concern that the soft drink industry will use this interim time period to lobby strongly against this tax and to use and abuse the “science” to suit their case.

The fact of the matter is that this tax will raise an amount estimated at between R10 and R15 billion. This is less than the estimated cost of diabetes treatment alone for South Africans. The costs of obesity, cancer,  cardiovascular diseases and other diseases linked to high sugar intakes are also unacceptably high and add to the health burden, over and above those of diabetes.

The fact is that the industry has already begun to raise its voice against this tax. In light of this it is critical that the government and the Minstries of Finance and Health in particular stick to their guns in ensuring that this tax is implemented on the proposed date and that the sugar and soft drink industries do not succeed in watering down this tax.

It must be additionally noted that the sugar industry is the only remaining sector of the South African agricultural industry that still receives subsidisation from the government. It is ironic that a product with such high health costs is not only encouraged but supported by government on the one hand and is now to be indirectly taxed on the other. Perhaps the Minister of Finance should examine this rather strange fiscal contradiction?


Not so cool drinks: Is it time for a sin tax?

Glenn Ashton.

Originally published on 21 January 2014.

A few decades ago city workers anticipated a cheap, relatively healthy lunch of a bunny chow – a dollop of stew or curry in a half loaf, along with a pint of milk. Today inflation and industrial food have shifted us to where a lunchtime visit to the corner shop or local supermarket reveals the extent of our dietary rot. For too many lunch often means a half a loaf of bread and a bottle of cool drink.

In our cities cool drinks have almost become ubiquitous, the daytime drink of choice. Sales are relentlessly driven by inescapable, hard-edged advertising, reinforced by aspiration, sugar rush and high doses of caffeine as worker fuel. Yet the reality is these are drinks from hell with no upside, either for productivity or health.

Despite pervasive industry spin, sugar, especially at such excessive levels, can never form part of a healthy diet. Sugar is basically empty calories, providing energy with no other nutritional benefit, all at considerable metabolic cost. Extensive research has shown how sugar is linked, through its close relationship to obesity and metabolic disruption, to increasingly common diseases such as diabetes, cardiac and circulatory problems, along with numerous other so-called dietary linked lifestyle diseases.

The United Nations World Health Organisation (WHO), informed by numerous medical and scientific experts has been convinced that excess sugar consumption essentially constitutes a dietary poison and presently wishes to recommend a halving of sugar consumption. Predictably, industry is counter-attacking. As far back as 2003 the WHO linked local sugar consumption in South Africa to increased risk of chronic disease, including obesity and associated diseases.

Since then sugar consumption has increased markedly. Sugar industry figures illustrate per capita consumption rising by nearly 15% over the past 13 years, to over 37 kilogrammes for every citizen. Diabetes incidence has accelerated even faster, up by 3.8% in 2010 alone. Notably, deaths ascribed to diabetes have risen most amongst the black community, from 5 754 cases in 1999 to 12 513 in 2010.

But this unfolding epidemic has a far more sinister side. Individuals with diabetes are more likely to succumb to tuberculosis, our leading cause of death. They are more susceptible to hypertension and circulatory diseases. Diabetes complicates treatment of HIV and AIDS. Even otherwise routine infectious diseases like influenza are more risky in diabetics for several reasons. Therefore, as an apparently distinct disease diabetes has major impacts on other leading causes of death.

While sugar may not be proven as the sole cause of diabetes, it is nevertheless strongly associated with both causation and worsening of outcomes. Some population sectors are highly predisposed to diabetes, particularly those of Indian origin in South Africa, where it is the single leading cause of death. More worryingly, at least half, and up to 85% of local diabetics are undiagnosed. When they are, it is often too late.

This epidemic does not only affect South Africans. It is predicted to become a leading cause of mortality in sub Saharan Africa by 2020. Drinking a single 330 millilitre soft drink daily is estimated to raise the risk of diabetes by 22%. Two litres of cold drink contains at least a cup of sugar, sometimes more. In 2011 South Africans each consumed nearly 50 litres of cool drink.

These excessive levels of sugar consumption affect everyone, from building site labourers to mothers inadvertently preparing their children for obesity and diabetes. Moreover, the market predicts accelerated growth in sales, with the consequence of an anticipated near doubling of diabetes cases over the next fifteen years as high sugar intakes are compounded by other poor dietary and lifestyle choices such as a lack of exercise and excessive intake of fats and salt.

The financial burden of the cost of medication alone for diabetes patients in South Africa is staggering, at around R7000 per individual, or a cumulative cost of over R14 billion a year to our health system, further treatment aside. So what can we do about this assault on our health?

Mexico recently proposed a 1 peso (80 cents) per litre tax on sodas, as they are called there. With Mexican obesity rates reported at 70% of adults and a third of children, action is clearly needed. The initiative was, predictably and bitterly attacked both by manufacturers and the sugar industry. They questioned New York’s ex-mayor Michael Bloomberg’s attempt to promote the tax, which was recently rejected in his home city, accusing him of hypocrisy.

Other places around the world have mooted or instituted cool drink or sugar taxes to deal with the impacts of sugar consumption. 33 states in the US have soda taxes, as does France, with a 3.5% tax introduced in 2012. Norway has a broader sugar tax, as does Denmark, although the latter proposes to abandon it. Indian research shows a 20% cold drink tax could avoid nearly half a million cases of diabetes and make a dent in obesity rates.

The concept of these Pigouvian taxes is neither new nor unfamiliar. The economist Pigou suggested that if business profits by selling a product that creates high external costs – for instance, the health costs of tobacco and liquor – the state should mitigate these by taxing the product. In South Africa these are traditionally referred to as sin taxes. There is no reason that sugar, along with other unhealthy foods laden with fats and salt, should not be taxed in order, on the one hand, to offset health costs while reducing consumption on the other.

Of course the problem can arise, as with tobacco, that the state becomes as addicted to the tax revenue as consumers are to sugar or tobacco. This is not a glib comment; studies clearly show the addictive nature of sugar. Food technologists constantly strive to make food as enticingly palatable as possible through subtle combinations of fats, salt and sugar.

Given the combined health effects of these ingredients, stricter regulation, combined with taxation would seem to be the most sensible way to protect ourselves against ourselves from this premeditated assault by the food industry. It is economically unsustainable to continue to subsidise junk food by absorbing the direct costs to our health system in order to treat the symptoms while failing to tackle their causes.


This article was originally published by SACSIS, the South African Civil Society Information Service and is republished under a creative commons licence.

Rip Eskom Apart – 2014

By Glenn Ashton · 18 Mar 2014

While rolling blackouts are never a joke, many South Africans cracked an ironic smile when Minister of Public Enterprises Malusi Gigaba remarked that Eskom was better prepared to deal with their recent power supply crisis than in 2008. Thanks for that insight, Minister.

Problem is, we still have rolling blackouts six years on, with things looking pretty dire as we approach winter. As usual we all pay, in different ways, for these systematic failures at the highest levels. Surely it is time to rip the inefficient beast that is Eskom apart, for once and for all?

Our most recent energy crisis comes against the background of the total withdrawal from Parliamentary consideration of the Independent System and Market Operator Bill, which potentially could have opened up our power market by levelling the playing field away from Eskom domination, enabling broader access to energy suppliers. The government shelved this bill for reasons which remain unclear. This all seems to run counter to Energy Minister Ben Martins’ statement that Eskom could no longer be player, referee and linesman in the energy sector, when he spoke at a recent Energy Indaba.

The Independent Operator Bill has been in the pipeline for nearly four years, through several iterations. The fact that our Minister Gigaba feels sufficiently strongly to defend inefficient behemoths like Eskom, then we have a problem. While Ministers Martins and Gigaba may demonstrate public solidarity, their policy positions are incongruous.

In reality, the ongoing incompetence of Eskom to manage its affairs is inescapable. Not only has it failed to pull Medupi contractors in line, but it attempts to abrogate responsibility for wet coal. There are multiple levels of irony, piled one atop the other. First is the quaint way we refer to “load-shedding,” rather than black- or brownouts, in our uniquely South African attempt to render such unpalatable reality more politically correct and expedient.

Second is how the most recent crisis was triggered by record breaking late summer rainfall, symptomatic of climate change. As one of the world heaviest polluters, South Africa, with Eskom in the lead, has failed to deal with its disproportionate emission levels. To further rub salt into this wound in the fabric of the ecosphere, Eskom, along with one of its suppliers, Exxaro, openly boast that we have 200 years of coal reserves, emphasising how this commercial vision blinkers our national energy policy.

In fact Eskom recently went yet further, asking for exemption from the stipulations of our long delayed National Air Quality Act because it would be too expensive to comply. Despite knowing about these requirements since 2004, Eskom has failed to address them. Even the proposed scrubbers for Medupi are to be postponed, indicative of a dismissive attitude toward the Air Quality Act.

Then there is the paradox that the company responsible for supplying sodden coal to Eskom, rendering the huge Kendal power station inoperable, was Billiton Coal. This is a division of the same transnational corporation, BHP Billiton, which receives Eskom power at prices well below cost for its Richards Bay aluminium smelters, devouring nearly 10% of our national energy supply.

Billiton Coal enjoys similar commercial confidentiality to Billiton Aluminium, where years of legal probing eventually revealed the true facts of its outrageously beneficial contracts with Eskom. The Billiton Coal contracts are similarly inaccessible, limiting public oversight of this serial failure. Given the strategic impacts of these failures on our national economy, these agreements should be closely scrutinised, with the guilty party held to account. Surely it is not the business of the state to subsidise massive transnational corporations? The National Energy Regulator really ought to show its teeth, if it has any.

Whichever way you cut it there is little good to coal power generation. Not only does it generate greenhouse gases, it also dumps over 200 tonnes of mercury in our soil and seas every year, along with a broad range of other nasty pollutants. Emissions are directly responsible for tens of thousands of deaths and illness. It destroys natural resources where it is mined. Despite all of this it remains central to Eskom policy for the foreseeable future.

The luxury of monopoly has blinkered Eskom to the extent that it simply cannot see beyond coal and nuclear. While it has commissioned some wind energy, this was only because of a compulsory offset for its World Bank loan to build Medupi and Kusile Coal stations, in a sop, a greenwash, to alternative energy.

So how should we restructure our overweight energy monopoly? Almost all energy analysts agree that the grid, that is the power lines and network to connect our national energy system, should become a stand-alone entity. This would immediately reduce Eskom dominance. It would also encourage the development of a smart grid, with an increased shift in focus away from large power plants toward decentralised medium, small and micro energy suppliers.

A major advantage of opening up the system, particularly to smaller operators, is that they are primary drivers of employment and economic growth. Eskom’s historical focus has been an energy supplier to mining and heavy industry, such as the steel and petro-chemical industry. This sector is contracting and shedding jobs. If South Africa is to become globally competitive it needs to shift toward a far more diversified economy premised on beneficiation and value-add to these primary industries.

Beyond creating a stand-alone smart grid, it is imperative to shift toward gas as a transitional fuel as part of the shift away from coal. Converting some of the older Eskom power stations, which are running out of locally accessible coal, to gas power would be one way. Another is to replace our hugely inefficient diesel driven turbine generators with gas. By securing preferential rates from neighbours like Mozambique and Tanzania, each of which have massive gas reserves, we could rapidly start to transition toward a cleaner economy.

We should also increase research around ground-breaking new power sources. Modular concentrated solar power plants are one concept that South Africa ought to have researched rather than wasting billions on the Pebble Bed nuclear pipe dream. Another is to develop viable current generation modules to tap into the Mozambique Current running down our east coast at a constant 5 kilometres per hour.

By coupling these opportunities to other emerging decentralised energy sources of energy, such as cross-subsidised domestic and industrial solar installations, South Africa could come to the forefront of international energy and policy development, while creating employment. In the final analysis, anything would be an improvement on the antediluvian, monopolistic state run Eskom dystopia that has actively prevented the emergence of a vision of a better energy vision for all. We certainly have sufficient resources – they just need to be prised from Eskom’s greedy clutches.

SACSIS Attribution
This article was first published on SACSIS, the website of the South African Civil Society Information Service –
Should you wish to republish this SACSIS article, please attribute the author and cite The South African Civil Society Information Service as its source.
The article is licenced under a Creative Commons Attribution Licence:

Poor Energy Policy Undermines Energy Diversity in South Africa – 2011

By Glenn Ashton · 15 Jun 2011

In 2010 Anton Bredell, Western Cape Environment Minister, reported that his department had received applications for installation of over 11 000 Megawatts (MW) of wind energy generation capacity. This is more than double the capacity of the controversial Medupi coal fired power station. This could make the Western Cape a net exporter of clean energy.

However a number of bureaucratic stumbling blocks have delayed and may halt these mainly privately funded, market-driven initiatives. Instead of being a simple matter of getting planning permission and connecting the grid, government structures remain more of a hindrance than help.

Our national energy policy remains contested ground. Despite years of discussion about opening up and diversifying our energy market, the reality has been unnecessary delays simply through a failure to put concrete policies and supportive energy regimes in place. This vacillation was directly responsible for the scheduled rolling blackouts, euphemistically referred to as load shedding, in late 2007.

Despite these massive economic costs, the political jockeying and intransigence continues. Instead of opening up the market Eskom did some navel gazing, belatedly focused on energy efficiency and more than doubled its prices.

Instead of promoting generating diversity and a competitive environment Eskom retreated to the energy laager, fast-tracking one of the word’s biggest coal fired power plants. Eskom continues to ignore concerns around the impacts of human triggered climate change. Its massive CO2 footprint and political influence combine to directly undermine sustainable development in South Africa.

Persistent delays in finalising Integrated Resource Plans (IRPs) lie at the heart of our problems. If we had harnessed all of the hot air generated by debating various iterations of IRPs since 2002 we wouldn’t need new generating capacity! The most recent version, IRP 2010, was promulgated nearly a year behind schedule and has generated huge controversy around its focus on coal and nuclear generation.

Along with IRP delays, the finalisation and clarification of the Renewable Energy Feed-In Tariff programme (REFIT) continues to compromise investment in renewables. The first iteration, published in 2009, is under revision and is tangled in red tape. It is remarkable how government fast tracks political priorities like secrecy bills, media tribunals and disbanding the Scorpions yet cannot finalise economically critical matters like energy policy.

The continued delays and non-consultative nature of IRP 2010 are directly related to this political intransigence and interference. The now infamous exposé of the ANC’s Chancellor House investment arm and its deals with the Japanese Hitachi consortium, contracted to supply boilers to the Medupi and Kusile power stations, hints at the extent of the problem.

The revolving door between political players and empowerment schemes is well established. For instance the Public Protector, Lawrence Mushwana found ex-politician Valli Moosa to have acted improperly. As Chair of Eskom he should not have been involved in awarding the Medupi boiler tender to Hitachi because of his ties to the ANC and hence Chancellor House.

According to a report by Shawn Hattingh of the International Labour Research and Information Group, Moosa also purchased shares in the services company Drake and Scull (which purchased Tsebo Outsourcing, previously Fedics) shortly before granting them a contract at Eskom. This sort of manoevering and influence peddling raises red flags about the structuring of IRP 2010 and related energy programmes.

During the late 1990s, the government’s market driven policies encouraged independent power producers (IPPs) to take up any slack in generation capacity. These Pubic Private Partnerships (PPPs) were stymied by Eskom’s excess capacity, lack of buy-in by Eskom and artificially low energy prices.

>â€A few small IPPs showed interest but their fingers have been seriously burned by the lack of clear policy. IPSA’s Cogen plant was contracted by Eskom to supply power over the World Cup period but remains marginalised. This uncertainty deters IPPs from entering the market. New policies are promised but not yet promulgated.

The IPPs dealing in renewable energy remain deeply affected by this uncertainty. They are further deterred by the proposed state tender system where the state will be the final arbiter of who delivers how much power to the grid. This is just one reason we have little chance of meeting promises for Carbon Emissions Targets set by the Department of Environment, by 2013.

The IPP regulatory system also introduces significant opportunities for economic and political interference. This is because well-connected individuals can align themselves with various energy start ups, either to improve BEE scoring or through providing access to tender committees, prime examples of rent-seeking and political patronage.

Given our power generation squeeze it is short sighted to impede the entry of new sustainable energy generation companies. If they are able to get planning permission, to install windmills, solar plants and provide power to the grid they should be encouraged, not kept waiting, dependent on arcane systems. Instead of facilitating entry, artificial barriers to entry are erected.

We also should ask why there has been such serious focus on large generation sources such as coal, nuclear and solar thermal, rather than decentralised, medium and micro supplies that encourage a diversified energy supply. Perhaps this is not only about stable energy supplies, but goes far deeper.

Given what happened with the Hitachi/Chancellor House deal, it is clear that mega-projects are far more prone to skimming and abuse by elites. Instead of fast-tracking an unambiguous energy policy, the vultures continue to circle.

Cosatu opposes any privatisation of our power generation capacity because of the profit motives involved. It has indicated preference for a centralised, state run energy utility. This would be sensible if Eskom was capable of pursuing its founding mandate to supply energy at lowest possible cost. The reality is that this mandate has been rapidly eroded and compromised poor planning and political interference.

Conversely, organisations like the Free Market Foundation insist that private capital would not enter the energy market if Eskom was competitive. The reality is that recent mismanagement has seen Eskom becoming an uncompetitive monolith.

Wind generation is already becoming directly competitive with Eskom’s escalating tariffs, without subsidisation. Wind energy companies will be able to generate power at less than half of the estimated R2.40 per kW rate Eskom is projected to be charging in 2014, underlining their eagerness to enter the market. Solar power and even innovative renewables like current generation must be enabled to enter the mix, through adoption of progressive energy policies.

It is notable that coal will be more costly than wind and even solar generation, especially if all the externalities are considered. Nuclear will be by far the most expensive option and it would never be considered by IPPs. Nuclear is not competitive; no unsubsidised, independent nuclear power generation facilities exist anywhere in the world. Fukushima will make nuclear even more expensive as further safeguards are installed. The latest third generation nuclear plants in Finland, France and USA are all going to be prohibitively expensive and our government is naïve in its wish to pursue nuclear options, on cost considerations alone.

It is also important to note the implications of the “Protection of Information Bill” for energy policy and transparency. Because energy is a key strategic resource, this “secrecy bill” would permit the state to declare any related information confidential. This would make it impossible to expose Chancellor House/Hitachi type deals. It would enhance the ability for graft, crony capitalism and politically connected cadres to rob us blind. Instead of being supported, whistle-blowers would be punished.

Diversifying our energy supplies means shifting away from coal and nuclear. They are each deeply problematic energy sources for complex reasons. Efficient diversification means shifting away from centralised energy generation. The recent publication of the draft Independent System and Market Operator (ISMO) bill should encourage open competition in the energy market.

If private power generators are able to reliably produce renewable energy at competitive rates, surely this benefits us all? Eskom has only itself to blame for its lack of competitiveness. By transparently opening the market, diversity of supply will naturally follow. Anyone, even trades unions, could invest.

Arguments that micro and medium power producers are unreliable are archaic. Modern communications, coupled to meteorological reports can inform a centralised electricity control system by sharing predictive inputs (weather reports, service downtime) and real-time generation patterns.

Our chaotic energy policy and planning, exacerbated by political short-termism, crony capitalism and secrecy, underlies most of our energy problems. It is not an option to throw energy generation to the wolves. However we would collectively benefit by creating an enabling climate where all players, from micro-generators, to medium sized renewable providers are able to contribute to a sustainable and energy secure future.

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This article was first published on SACSIS, the website of the South African Civil Society Information Service –
Should you wish to republish this SACSIS article, please attribute the author and cite The South African Civil Society Information Service as its source.
The article is licenced under a Creative Commons Attribution Licence:

Eskom is the Problem, Not the Solution – 2010/2.0

By Glenn Ashton · 26 Jan 2010

The ongoing public debate about electricity price hikes raise questions about how our national energy policies are decided. Public interaction with the National Electricity Regulator of South Africa (NERSA) cannot yield expected results, as NERSA is little more than a messenger and not the framer of policy. The real problems revolve around the relationship between Eskom, the state and the ruling party and the degree of influence that our electrical generation behemoth wields.

The relationship between Eskom and the state runs deep. It was initiated when the Smuts Government created the Electricity Supply Commission (Escom) in 1923. Escom was directed to provide cheap, abundant and reliable power to government departments, railways, harbours, local authorities and industry. Escom operated efficiently for decades, but its policies and practice are now stultified and outdated.

Renamed Eskom in 1987, it remains a parastatal public utility. As such, it is indivisible from the state. As we shall see, this is a fundamental weakness. As a monopolistic industry it dictates the rules regarding competition, while also holding the whip hand in controlling and shaping national energy policy, such as the dismally failed PBMR that has cost it – and us all – dearly. Through its management and maintenance of the transmission infrastructure it is able to actively prevent open participation in the power market.

Given our recent history with power supply shortages, Eskom appears to be the natural place to seek solutions. Instead Eskom has perpetuated our problems. It has shown itself unable to devise creative solutions or to clearly analyse shortcomings in state energy generation policies. It has become a poorly run utility, lacking vision.

In crisis it has instead turned to solutions such as reducing demand through ‘demand side management’, long touted by civil society and public commentators as providing cost effective alternatives to building more expensive capacity. Eskom’s panicked subsidisation of compact fluorescent light bulbs, gas stoves, solar water heaters, blankets and timers for geysers is palpably too little, too late.

The primary reason that Eskom never embarked on demand side management is because it is a utility whose primary objective is selling as much of its product as possible and which had, until recently, excess capacity it wished to utilise. It had no interest in reducing demand and consequently lacked strategic vision.

The cut-price contracts given to overseas aluminium corporations soaked up our excess capacity that clearly exposes Eskoms short-term planning and lack of vision. The reality that aluminium refineries now consume nearly 10% of Eskom’s total generating capacity, while providing only a few thousand jobs and limited revenue to the national fiscus, illustrates how this one-sided deal primarily benefits aluminium producers at our expense.

Hocking our power generation capacity to corporate entities at utterly unrealistic prices, estimated (Eskom obdurately refuses to disclose contract prices) at a quarter of the price that domestic consumers now pay for electricity, underlines the extent to which this decision runs counter to the national interest. It is akin to enticement.

Eskom’s pervasive influence on national energy policy, its monopoly over transmission and nearly all generation, emphasises how the quasi-corporatisation of Eskom has changed it from its initial role of a utility to that of a profit-driven monster operating against the national interest.

This is perfectly illustrated by Eskom’s interference in the solar water heating industry. Through its demand side management policies it has, with state blessing, instituted a putative subsidy system to supposedly encourage the uptake of domestic solar water heating. While this appears good on the surface, examination of the real effects illustrate a more sinister reality.

The first year of this subsidy programme resulted in the installation of just over 1000 solar water heating systems, by all accounts a dismal failure. This number would probably have been exceeded had the ‘subsidy’ not been in place.

An examination of the numbers shows how the subsidy system has had a sharply inflationary effect on solar water heating systems in South Africa. Under the Eskom agreement, each complete system must be SABS tested, costing approximately R35,000. Given that at least 135 different systems have been tested, the direct cost of this testing alone has added at least R4.7 million to the cost borne by the solar water heating industry.

To this amount, add substantial administration costs, both by installers and Eskom, an insistence on expensive compliance with ISO checklist practices and many other additional costs. This programme therefore increased the price of each system installed in the first year by an average of at least R5,000 each. This conservative estimate could be easily double, and ongoing costs continue. It excludes Eskom’s doubtless substantial administration costs, auditing programme, and advertising, not to mention the loss of electrical revenue.

Clearly this supposed solar subsidy system has cost all parties dearly. We have failed to examine how Australia, New Zealand, China, the US and the EU have all succeeded in solar heating rollout, while we have spectacularly failed. But this is not the end of it.

Many of the SABS tested solar systems use identical hot water cylinders made by local manufacturers, several of which have now been tested tens of times. The profit oriented focused SABS is smiling but the solar industry is not. The same applies to many of the solar heating collectors. Instead of establishing the efficiency of each cylinder and each solar collector individually, giving a rating to each and then providing a flat rate subsidy on that basis, as is best practice elsewhere, Eskom and the SABS have undermined the solar water heating industry at every step. ‘Unsubsidised’ (read ‘not artificially inflated’) solar water heating remains significantly cheaper than subsidised systems.

The government is about to release its national solar water heating strategy and implementation plan, which will build on the Eskom solar water heating rollout. This strategy has been rushed through without adequate consultation. Its draft contains appalling misconceptions about our local solar water industry.

For instance, it repeats the baseless assertion that we have inadequate capacity to roll out solar water heating in South Africa. The fact is that we have plenty of capacity to supply local cylinders and collectors, if the government supported instead of undermined renewable power supplies through accepting Eskom’s negative assertions about renewable energy.

Eskom habitually rejects ‘renewables’ through the deceptive practice of externalising the true costs of conventional energy and failing to account for its inflationary fuel costs. The real costs of waste management, air and land pollution and health impacts from fossil and nuclear energy sources are always excluded when calculating power generation costs. The impacts of mercury on people, land and fish from coal power are externalised. The pollution of water sources by coal mining is ignored. Were all these costs included, renewable energy would be seen to be more than competitive yet the reality is hidden behind falsified statistics and incomplete accounting practices.

At the heart of the problem with our energy supply lies the relationship between Eskom and the state. The latter is indivisible from the government of the day, run by the ANC. It is, sadly, all profoundly reminiscent of the corrupt National Party, which also benefited from its incestuous affair with Eskom.

Party cadres are instrumental in deciding the energy procurement process, which has undermined transparent tendering. The relationship between the ANC, Chancellor House and Hitachi, the supplier of generation systems for the new coal fuelled stations, is unacceptably murky. And just why are these new power stations costed at three times the amount of similar plants elsewhere in the world? Who pays? Us, the people.

Behind this mess, lies the King Kong of party political funding and crony capitalism. Until such time as spotlights are focussed on this beast, and proper public scrutiny applied, we the public, rich and poor alike, will be endlessly shafted by the evil axis of power producers allied to those who hold the reins of political power.

The nightmare of our frayed energy policy must end. Eskom must be held to account, not through the lame duck of NERSA, but directly through the legal system and active application of the Public Access to Information and the Public Access to Justice Acts. Urgent public oversight is required through these legal mechanisms.

The ruling party must be interrogated as to exactly what is going on in Chancellor House, and how political cronyism threatens national energy policy and practice. The pathetic sideshow and internal squabbling around immature reactions to personal critique diverts attention from matters of governance.

The funding of all political parties must be opened to scrutiny. The cancer of party political funding, both within the ruling party and the official opposition must be excised. The arms scandal is small change compared to the potential costs of the looming energy scandal.

We have seen our electrical power go from the cheapest to in the world to where it will soon be the most expensive in less than a decade. Is this leadership? Is this visionary? Is this being interrogated by the opposition? No to all of the above.

At the heart of this lies Eskom. It is the problem and not the solution.

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Eskom: Plunging Us into Darkness – 2010

Eskom: Plunging Us into Darkness

By Glenn Ashton · 18 Mar 2010

Those responsible for formulating the policies required to solve our national energy crisis are clearly floundering, all at sea, while the great white sharks of international capital circle for the kill.

Our national energy policies are a mess. We have signally failed to formulate a comprehensive long-term energy policy since democracy in 1994, instead relying on ad hoc responses by both Eskom and politicians.

The incestuous Tweedledum and Tweedledee relationship between Eskom and the state undermines public participation in formulating energy policy. The excessive provision of energy capacity by the technocratic central planners of the Apartheid state enabled the new South Africa to ride on the shirttails of its predecessors. However this capacity was rapidly absorbed, primarily through controversial deals with major energy consuming industries.

The sweetheart deal between Eskom and Billiton to exploit our cheap and dirty power to transform Australian bauxite into aluminium and then export the profits is both an outrageous abuse of a national resource and a cautionary tale. It is a relationship that costs us all dearly. We lose electricity capacity to corporate predators. The public effectively subsidises this cut-rate power effectively sold to Billiton below cost. This is effectively redistribution from the poor to the rich.

Aluminium, with its massive power requirements, has been called solidified electricity. Eskom is instrumental in maintaining Billiton as one of the worlds six biggest aluminium companies. Billiton is also one of 138 Eskom customers, which receive electricity at between nine and 35 cents a Kilowatt hour (kWh) — at a rate that averages 17 cents per kWh, for almost 40% of Eskom’s total output.

This is more than three times less than the 59 cents per kWh paid by most South African consumers, which is set to rise to around R1 per kWh when the full National Electricity Regulator (Nersa) approved increase has been implemented over the next three years. The poor and middle classes, together with smaller businesses are effectively subsidising Billiton and 137 other favoured and already wealthy entities.

Earthlife Africa recently showed how poor consumers who rely on prepaid meters already pay around 72 cents per kW/h; four times more than the average discounted Eskom rate.

Billiton is apparently one of two companies with a special long-term discount power contract with Eskom and gains its profit at our collective expense. Do we, as a nation, owe privately held corporations a profit, especially if this is at cross-purposes to both our individual and national interests? Surely Billiton and other wealthy, privileged entities should simply pay the same as everyone else?

The preferential tariff rate granted by Eskom to these companies is by its very nature anti-competitive, across the board. This unfair discount, which arose through the government wishing to project an atmosphere of business friendliness, severely disadvantages smaller companies.

Any energy reliant start up enterprise is automatically compromised by the massive advantages these Eskom subsidies provide. There is clearly a role for the competition tribunal to play in this sordid saga.

The names and the exact rate that each of these privileged companies pays must be legally interrogated and revealed. Eskom is a public entity. South Africans have a vested interest in the fairness and transparency of how this public utility is run and its discriminatory behaviour is patently unfair.

Public utilities should not be permitted to hide behind the cloak of corporate confidentiality. The fact is that the state, as Eskom’s sole shareholder, has failed to adhere to the corporate governance principles that the private sector is required to. Eskom does not fulfil its requirements of stakeholder participation and transparency as set out in the King 3 report (Chapter 8), which states that the critical role of stakeholders – which in this case includes all South Africans – cannot be ignored.

The Eskom board has proven itself incapable of projecting or formulating a meaningful energy policy and has failed in its charter role of serving the people of South Africa. The manner in which Eskom, through its inordinate influence on Nersa, has forced through inflationary energy policies while capping alternative energy supply, can only lead to the conclusion that those at the helm of Eskom have lost the plot and are operating beyond their mandate.

We should recall however that Eskom did approach the government in the late ’90s to highlight that it was rapidly approaching operational capacity, and was rebuffed. Instead pseudo-solutions like the Pebble Bed Modular Reactor were promised. The state has utterly failed to pursue, let alone achieve, proclaimed energy targets, particularly in renewable energy.

In 2003 we set a 10,000 gWh renewable energy target, to be achieved by 2013; to date we have installed less than one percent of that goal. Yet Public Enterprises Minister Barbara Hogan blindly insists we will meet this target! What hope have we against such bombastic hubris?

While a renewable energy feed-in tariff was recently cemented after years of dithering by Nersa, it is too little too late. Had we met proclaimed renewable targets we would need to build neither Kusile nor Medupi power stations. Nersa’s dithering has been compounded by Eskom’s consistent anti-competitive bias.

Now the government has insisted that renewable energy supply must be capped at unrealistic levels and put out to tender. Surely any agency that can competitively supply power should be permitted to enter the market? This starkly illustrates the contradiction of the state being Eskom’s sole shareholder, and then in turn using the authority of the state to stifle competition.

Our energy policy lacks considered planning. Career politicians like Alec Erwin utterly failed to develop meaningful policies, instead engaging in counter-productive pro-nuclear daydreaming. Yesterday’s sweetheart, Barbara Hogan’s shift from Health to the Department of Public Enterprises has repeatedly demonstrated that she too has succumbed to a nuclear-induced dwaal.

Hogan’s recent proclamations that we must embrace the nuclear option are both premature and untested. She ignores that nuclear power will cost nearly twice the amount Eskom wishes to charge us in three years time. The nuclear power plant being built in Finland by Areva, identical to the units it wishes to build here, is twice over budget and schedule and will be lucky to produce power at less than R2 per kWh. The alternative, US sourced systems, are equally problematic.

Last year we rejected the nuclear option as being too expensive. Now Hogan expounds on its viability. What has changed in six months? This indicates staggering incompetence and a lack of consistent policy. Lance Greyling of the Independent Democrats, who is one of the few politicians with a decent grasp of energy policy, has pointed out that it is not Hogan’s place to make such proclamations before any consultative process has occurred.

Furthermore, Hogan insists Eskom no longer is a power monopoly. She makes this absurd claim because companies like Sasol (which also benefit from Eskom’s special rating dispensation) are now permitted to sell minuscule amounts of excess energy onto the grid! Barbara is clearly in wonderland.

Hogan is also panicking about the acute pressure being brought to bear by a broadly representative civil society coalition against a World Bank loan, sought to fund Eskom’s Medupi coal fuelled power station. This loan is in direct contravention to proposed World Bank lending criteria. This loan will also subsidise “tenderpreneurs” associated with the ANC linked Chancellor House, which in turn has accrued interests in the Hitachi Corporation that is contracted to provide generation equipment for the coal power plants.

Hogan’s counter that this World Bank loan provides 7% (R1.95 bn.) for renewables simply illustrates the green-wash behind this entire policy fiasco. Her claim blithely ignores the fact that this is 8% less than the established government policy of the 15% renewable mix required in any new energy generation capacity.

This all glosses over the fact that the government has thrown away at least R15 billion on the hare-brained Pebble Bed Modular Reactor, which actually cost far more in lost opportunities as it diverted power policy attention from alternative supply options. The kickbacks from the coal and nuclear expansion will eclipse the arms scandal by degrees of magnitude, while simultaneously exacerbating our power woes.

We require an urgent national debate about what is required to extricate ourselves from our policy chaos. Our solar water heating policy is unworkable. Our waste to energy policy is rubbish. Our renewable energy policy is ignored. Our proposed spending on supercritical coal fired power stations is excessive. Our proposals to engage in ‘carbon capture and storage’ are not grounded in reality. Eskom and national governments’ interference in allowing the open market to establish renewable energy generation plants is unacceptable. The lack of transparency underlying Eskom’s price structures is disgraceful.

There no single area of our national energy policy that is not problematic. The cabinet and relevant ministries have shown themselves incapable of solving this problem.

Unless there is an urgent review of this whole sorry saga we are positioning South Africa to financially compromise its good standing, simply because we cannot adequately or competitively power our economy. We are being set up for a failure that opens our doors to the sharks and vultures of the developed world – the World Bank, the International Monetary Fund and the rest of the Washington consensus – which will put us collectively in hock for generations to come, to be paid off with our abundant resources and by the sweat of our brows.

The heat being generated by the hands gleefully rubbing together in Washington is almost palpable, as they look south…

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Should you wish to republish this SACSIS article, please attribute the author and cite The South African Civil Society Information Service as its source.
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